Is Blockchain Property Here to Stay?
Blockchain Property Transactions are already happening globally. Is Malaysia ready?
4 min read
From western California, to Manhattan on the East Coast, and even reaching Spain, Blockchain property deals are no longer theoretical but are instead quickly becoming part of our present reality. As this new technological wave in property markets sweeps over from West to East, are Malaysians prepared to leverage on blockchain in their property dealings?
As processes such as valuation, underwriting, financial evaluation, and conveyancing begin to be automated by blockchain programs, what strategies can existing middlemen develop to continue to provide value within the property industry?
Why Blockchain Enables Transformation
As blockchain start-ups work their way into the property market, it can be beneficial to understand the key benefits of introducing blockchain in property.
Blockchain technology is a digital distributed ledger that relies on a collective network of nodes to publicly distribute, verify, and record data that cannot be later modified. This design principle allow transactions carried out on blockchain to have these benefits:
- Trust-free transactions that are verified by the blockchain network, and may require no third party verification.
- Distributed ledger of all transactions that is highly available, consistent, and updates in near-real time.
- Transaction data on already on the blockchain cannot be altered or manipulated.
However, these features also mean that there might no longer be a need for middlemen such as lawyers and conveyancers to regulate or verify various components of the property transaction process.
3 Ways Blockchain will Impact Property Transactions
Blockchain-based start-ups have begun to introduce new property/blockchain integrations that support or simplify property transaction and listing processes in three major ways.
- Smart Contracts: Simplifying Property Transactions
At its core, property smart contracts enables the exchange of property and payments as part of a blockchain transaction, allowing the transaction to be done in an automatic, secure, and transparent manner.
Many traditional verification processes can instead be executed through smart contracts on the blockchain network, effectively removing the need for certain middlemen such as lawyers and conveyancers.
The distributed, fail-safe nature of the blockchain ledger would also heavily protect all parties from fraud. Digital identities on blockchain could also entail information such as vacancy, tenant information, and financial details in a digitized and tamper-proof form.
- Trustworthy and Efficient Platform for MLS
Today, many multiple listing services (MLS) exist to supply buyers, sellers, and brokers with relevant property information. These MLS platforms are accessible with costly subscriptions or fees, and the information paid for has a chance to be inaccurate or insufficient.
In contrast, a multiple listing service that is built on blockchain will be allow data to be efficiently distributed and verified across a public network, with data presented being easily searchable and highly accurate, and therefore more trustworthy. As such, a blockchain-based MLS will potentially be able to provide more reliable information that accurately represents the market to participants at a lower cost.
- Expedite Pre-Lease Due Diligences and Financial Evaluation
Today, pre-sale processes such as conveyancing and due diligence activities are highly time-consuming and costly, and can be vulnerable to error.
A blockchain-based land registry that tracks the digital identities of properties could greatly improve on this process. Title ownership and property details will become easily accessible, transparent, and verifiable by both parties, speeding up some pre-sales processes such as underwriting and financial evaluation at a margin of traditional costs. This concept is already in early phases of adoption: The Bank of China uses a property valuation platform powered by blockchain.
Through Blockchain technology, property transactions and pre-sale processes will be simplified and expedited, while becoming more secure and convenient for both parties with a reduced need for middlemen. Potentially, Blockchain Property Transactions could develop a sizeable demand in the Malaysian Property Market.
However, there are several structural and legal challenges to be overcome before full-fledged adoption becomes possible, such as validating and transferring property information from the databases of land registries and MLS platforms onto the blockchain, and introducing new property laws and policies to regulate and standardise smart contracts and other blockchain property processes. For now, there is no consensus on how quickly adoption will occur, or the degree of adoption that will exist globally and in Malaysia.
As such, property market participants such as middlemen have a window of time to learn and adapt to the potential spread of blockchain technology in the Malaysian property scene.
While middlemen could potentially be in lesser demand as smart contracts become more popular, these middlemen will still have the expertise that most parties lack. Could middlemen double as property blockchain consultants or mediators to continue to provide value within the property industry?
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